The way Europe's Net works

Some Europeans thumb their noses at the American policy of net neutrality.

What’s neutral about it?

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They argue that U.S. regulators have, in fact, sided with Internet content and service companies by giving them a free ride on the backs of broadband providers.

It’s a common theme in conversations about why Europe has opted for unregulated competition to guard against anti-competitive behavior on the Internet, while, on this side of the pond, the Federal Communications Commission in January adopted open Internet regulations.

“There is a perception in Europe that the winners in the net neutrality debate are those who seem to advocate for it most strongly, which are primarily on the application side,” former Ambassador David Gross said. Gross, an appointee of President George W. Bush, served eight years as the U.S. coordinator for international communications and information policy at the State Department.

Application-side companies include Google, Amazon, Facebook, Hulu and other businesses providing content and services on top of the Internet.

But in Europe, regulators have charted a very different path.

Instead of adopting formal rules that prohibit degrading Internet traffic or unreasonable network management that could marginalize the consumer or startup business, Europeans are relying primarily on competition to guard against anti-competitive behavior on the Web. The European Union’s “competitive Internet offers” and ease of “switching” providers should not be underestimated for its role in supporting regulation-free net neutrality, Neelie Kroes, the European Commission’s vice president and the European digital agenda commissioner, said in a November speech.

As proof of her confidence in the marketplace, Kroes later said that people cut off from Skype should vote with their feet and leave their mobile provider.

“A healthy competitive environment allows tackling many potential problems at their root, avoiding the emergence of monopolistic gatekeepers, which could create serious dangers for net neutrality,” Kroes said. “This is why the debate is different here than in the United States.”

In Washington, Scott Cleland, a self-employed industry analyst with a free-market bent, takes that argument several steps further.

A perennial Google critic, Cleland argues that Europe is looking to spread the cost of producing a high-bandwidth Internet among both Internet service providers and application providers. In contrast, he said that Silicon Valley — where Google, Facebook and many other Internet application companies are based — has been the principal lobbying force behind the net neutrality rules in America. That type of economic force doesn’t exist in Europe on the same scale, he noted.

“Internet sustainability” is the buzzword in Europe, another industry observer told POLITICO. Some parties in Europe are concerned that if the Internet operates on a “one-sided business model where the networks are the only ones shouldering the cost of the network expansion, it’s not sustainable.”

Aside from perceived industrial winners and losers in the net neutrality fight, the other major component that differentiates the U.S. from Europe is the very underlying model for telecommunications providers.

“What sets apart Europe from the U.S. is the availability of unbundling,” said Sam Paltridge, a telecommunications official with the Organization for Economic Co-operation and Development. “The DSL lines are available for any number of new entrants to come in and offer services.”

That is to say, in Europe, unlike in the U.S., regulations require telecommunications companies to allow different retail parties to sell Internet service to consumers off the same fiber. In America, only Verizon sells Internet service from Verizon’s wire-based service.

One of the principal concerns of net neutrality in the U.S. has been that Internet service providers have a commercial incentive to block third-party retailers of competing services — such as Internet telephony (Skype) or digital video (Netflix). The idea that government shouldn’t intervene against companies blocking applications is blasphemous to American net neutrality purists.

Paltridge disagreed with a notion put forth by a Wall Street Journal blog last week that net neutrality has “lost” in the EU because formal regulations are not being pursued. “The regulation is in a different area: unbundling,” the official told POLITICO.

“What Europe is saying is that we don’t think anybody is going to make it in the marketplace if they engage in blocking or degrading” of content or applications, said Walter McCormick, president of USTelecom, the principal broadband trade association.

The downside of the European system, McCormick said, is the lack of incentive to invest in infrastructure.

The irony of the situation is not so much that Europe is embracing a free-market approach whereas the U.S. has opted for regulation, McCormick said, but that the U.S. is the source of the original policy that competition is superior. That’s the idea that gave rise to Internet competitors such as Google to begin with.